Eastlake Lofts Condo. Assn v. Kevin M. Hoover, Et Ano

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
EASTLAKE LOFTS CONDOMINIUM
ASSOCIATION, DIVISION ONE
Plaintiff, No. 78266-5-I (consol. with
No. 78267-3-I)
V.
UNPUBLISHED OPINION
KEVIN M. HOOVER and JANE DOE
HOOVER, husband and wife, and their
marital community; WILMINGTON
TRUST, N.A., as successor trustee to
CITIBANK, N.A., as Trustee for
Certificate Holders of Structured Asset
Mortgage Investments II Trust 2007-
AR5, Mortgage Pass Through
Certificates, Series 2007 AR-5,
Respondents,
THE CONDO GROUP, LLC;
EASTLAKE LOFTS 205 LLC, a
Washington limited liability company;
LAKEWOOD COMMONS 234 LLC, a
Washington limited liability company;
UMPQUA BANK, a bank organized
under the laws of Oregon; DELNA LIAN
JACOBS, an individual residing in
California; CHRISTINA JACOBS SPITZ,
an individual residing in California and
the Executor of the ESTATE OF
HAROLD LIAN; MAYNARD GROSS, an
individual residing in California;
unknown heirs of CARL ELLING LIAN; FILED: July 29, 2019
WE TRUST COMPANY, a Washington
company;
Appellants.
No. 78266-5-1/2
DWYER, J. — In 2011, Eastlake Lofts Condominium Association foreclosed
on a condominium owned by Kevin Hoover without properly serving process on
CitiBank, a junior lienholder. The Condo Group, LLC purchased the
condominium at a sheriff’s sale and, in 2013, sold itto Carl Lian, who financed
his purchase with a loan from Umpqua Bank. Lian later died. In 2016, CitiBank
successfully moved to vacate the original foreclosure judgment as against its
interest. Wilmington Trust, NA., the successor in interest to CitiBank, then
sought to foreclose on its existing lien, adding The Condo Group, LLC, Lian’s
heirs, and Umpqua Bank as third party defendants. The case is before us on
appeal from the trial court’s grant of summary judgment to Wilmington. Because
the evidence of record gives rise to competing inferences as to the applicability of
equitable defenses to the foreclosure action, summary judgment was improper.
Accordingly, we reverse.
In 2007, Kevin Hoover purchased a condominium in the Eastlake Lofts
development with the aid of a $358,950 loan from CitiBank, secured by a deed of
trust. JPMorgan Chase Bank was the loan’s original servicer. CitiBank’s interest
in the property was placed into a securitized mortgage trust for which CitiBank
was a beneficiary, with Quality Loan Service Corporation (QLS) as trustee. In
2010, Hoover filed for chapter 7 bankruptcy protection and ceased paying dues
to the Eastlake Lofts Condominium Association (the Association).
In July 2011, the Association commenced this action to foreclose its lien
on the condominium. It named CitiBank as a defendant. Personal service of the
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No. 78266-5-1/3
summons and complaint was not made on CitiBank in Washington but, rather,
was made at an office in Sioux Falls, South Dakota. No affidavit was sworn and
filed with the trial court to the effect that service on CitiBank could not have been
made within Washington, as required by RCW4.28.185(4).1 After neither Hoover
nor CitiBank made an appearance in the action, a default judgment and
foreclosure decree was entered in favor of the Association.
A foreclosure sale took place in June 2012. The highest bidder, The
Condo Group, LLC (Condo Group), purchased the condominium for the amount
of the judgment debt, $20,100.2 After the one-year redemption period expired,
the King County Sheriff issued Condo Group a deed to the condominium
identifying the $20,100 purchase price. Condo Group recorded this deed with
the county auditor.
In October 2013, Condo Group sold the condominium to Carl Lian for
$399,000 and conveyed a statutory warranty deed to him. Lian’s purchase of the
condominium was partially financed with a $100,000 loan from Sterling Savings
(now Umpqua) Bank.
Stewart Title acted as the closing agent and title insurer for Lian and
Umpqua in this transaction. Stewart Title had constructive knowledge of
CitiBank’s deed of trust on the condominium. However, neither Stewart, nor
Umpqua, nor Lian made an inquiry as to whether CitiBank considered the deed
of trust to be an active encumbrance against the condominium.
1RCW4.28.185(4) states as follows: “Personal service outside the state shall be valid only
when an affidavit is made and filed to the effect that service cannot be made within the state.”
2 At the time of the sale, the condominium was valued by the county assessor at $277,000.
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No. 78266-5-1/4
In 2016, CitiBank, alleging improper service, moved to vacate the 2011
default judgment against it pursuant to CR 60(b)(5) for lack of personal
jurisdiction. After hearing argument, the trial court granted CitiBank’s motion and
vacated the judgment against it. Subsequently, Wilmington acquired CitiBank’s
interest. Wilmington then answered the Association’s 2011 complaint and
asserted a foreclosure claim, naming Condo Group, Lian, and Umpqua as third
party defendants. Lian died before he could be served. Wilmington’s third party
complaint was twice amended to designate Lian’s known heirs as third party
defendants. Lian’s heirs, Umpqua, and Condo Group all opposed Wilmington’s
foreclosure request, asserting their entitlement to several equitable defenses or
to bona fide purchaser protection.
The trial court granted partial summary judgment to Wilmington and
entered a decree of foreclosure in its favor. This ruling also dismissed with
prejudice Condo Group and Umpqua Bank’s counterclaims against Wilmington.
In a supplemental judgment, the trial court awarded Wilmington attorney fees and
costs totaling $33,238.99. Condo Group, Lian’s heirs, and Umpqua Bank
appeal.3
“The de novo standard of review is used by an appellate court when
reviewing all trial court rulings made in conjunction with a summary judgment
motion.” Folsom v. Burger King, 135 Wash. 2d 658, 663, 958 P.2d 301 (1998). In
~ Together, Lian’s heirs and Umpqua Bank have submitted a single set of briefs, while
condo Group Ijas submitted a separate set of briefs. To avoid confusion, we will refer to Lian’s
heirs and Umpqua Bank collectively as “Umpqua.” However, Lian will be referred to as an
individual where actions he took are being discussed.
4
No. 78266-5-115
reviewing a summary judgment order our inquiry is the same as the trial court’s.
Folsom, 135 Wash. 2d at 663. Summary judgment is proper when all of the
pleadings, affidavits, depositions, and admissions on file show “that there is no
genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” CR 56(c). A material fact “is a fact upon which the
outcome of the litigation depends, in whole or in part.” Lamon v. McDonnell
Douglas Corn., 91 Wash. 2d 345, 349, 588 P.2d 1346 (1979) (quoting Morris v.
McNicol, 83 Wash. 2d 491, 494-95, 519 P.2d 7 (1974)).
The party moving for summary judgment has the burden of showing that
there is no genuine dispute as to any issue of material fact. Once that burden is
met, the nonmoving party has the burden of producing evidence to show the
existence of such an issue. Kahn v. Salerno, 90 Wash. App. 110, 117, 951 P.2d
321 (1998). All evidence must be considered in the light most favorable to the
nonmoving party, and summary judgment may be granted only when a
reasonable person could reach but one conclusion. Lamon, 91 Wash. 2d at 349
(quoting Morris, 83 Wash. 2d at 494-95).
As we have stated,
“The object and function of summary judgment procedure is
to avoid a useless trial. A trial is not useless, but is absolutely
necessary where there is a genuine issue as to any material fact.”
Barberv. Bankers Life & Cas. Co., 81 Wash. 2d 140, 144, 500 P.2d 88
(1972). “A material fact is one upon which the outcome of the
litigation depends.” Balise v. Underwood, 62 Wash. 2d 195, 199, 381
P.2d 966 (1963). Importantly, “even if the basic facts are not in
dispute, if the facts are subject to reasonable conflicting inferences,
summary judgment is improper.” Southside Tabernacle v.
Pentecostal Church of God, 32 Wash. App. 814, 821, 650 P.2d 231
(1982). Indeed, “[s]ummary judgment procedures are not designed
to resolve inferential disputes.” Sanders v. Day, 2 Wash. App. 393,
5
No. 78266-5-116
398, 468 P.2d 452 (1970). “It seems obvious that in situations
where, though evidentiary facts are not in dispute, different
inferences may be drawn therefrom as to ultimate facts such as
intent,. a summary judgment would not be warranted.” Preston
. .
v. Duncan, 55 Wash. 2d 678, 681-82, 349 P.2d 605 (1960); accord
Weisert v. Univ. Hosp., 44 Wash. App. 167, 172, 721 P.2d 553
(1986).
Kelleyv. Tonda, 198 Wash. App. 303, 310-11, 393 P.3d 824 (2017).
‘[T]he question of whether equitable relief is appropriate is a question of
law.” Niemann v. Vaughn Cmty. Church, 154 Wash. 2d 365, 374, 113 P.3d 463
(2005). Due to the discretionary nature of decisions made in equity, granting
equitable relief on summary judgment may often be inappropriate.
Cornish CoIl, of the Arts v. 1000 Virginia Ltd. P’ship, 158 Wash. App. 203, 220, 242
P.3d 1 (2010). Equitable claims must be analyzed pursuant to the facts of each
case to which a party seeks their application; even when a court
“recognize[s] ‘factors’ to guide the court’s determination of the equitable issues
presented, these considerations are not exclusive, but are intended to reach all
relevant evidence.” Vasguez v. Hawthorne, 145 Wash. 2d 103, 107-08, 33 P.3d
735 (2001). In other words, even when there is evidence satisfying all such
“factors,” equitable relief does not necessarily follow. Instead, “the focus remains
on the equities involved between the parties.” Vasguez, 145 Wash. 2d at 107.
Ill
First among the sundry defenses asserted by Umpqua and Condo Group
against Wilmington’s efforts to foreclose is the doctrine of laches. Laches bars
Wilmington’s action, they assert, because Wilmington and CitiBank, collectively,
unreasonably delayed the foreclosure action, and during the period of this delay,
6
No. 78266-5-1/7
the condominium’s ownership situation changed to the extent that enforcement of
the deed of trust would work an injustice. For its part, Wilmington denies that any
delay was unreasonable and avers that the trial court was correct to dismiss this
defense on summary judgment. Because the evidence of record gives rise to
competing inferences as to the propriety of the asserted defense, trial court fact-
finding is necessary.
Laches is an equitable defense that is based on estoppel.4 Real
Progress, Inc. v. City of Seattle, 91 Wash. App. 833, 843-44, 963 P.2d 890 (1998).
The doctrine applies when a defendant affirmatively establishes “(1) knowledge
by plaintiff of facts constituting a cause of action or a reasonable opportunity to
discover such facts; (2) unreasonable delay by plaintiff in commencing an action;
and (3) damage to defendant resulting from the delay in bringing the action.”
Davidson v. State, 116 Wash. 2d 13, 25, 802 P.2d 1374 (1991). “To constitute
laches there must not only be a delay in the assertion of a claim but also some
change of condition must have occurred which would make it inequitable to
enforce it.” Waldrip v. Olympia Oyster Co., 40 Wash. 2d 469, 477, 244 P.2d 273
(1952). “[W]hen asserted in opposition to the interest of a landowner, flaches]
must be proved by clear and convincing evidence.” Arnold v. Melani, 75 Wash. 2d
143, 148, 449 P.2d 800, 450 P.2d 815 (1968). “Generally, laches depends upon
‘~ “‘Laches has been applied by Washington courts since 1894.” Newport Yacht Basin
Ass’n of Condo. Owners v. Supreme Nw., Inc., 168 Wn. App. 56,77 n.17, 277 P.3d 18(2012)
(quoting Deane W. Minor, Recent Development, Hayden v. City of Port Townsend, 93 Wash. 2d
870, 613 P.2d 1164 (1980), 56 WASH. L. REV. 549, 554 (1981) (citing Rigneyv. Tacoma Light&
Water Co., 9 Wash. 576, 38 P. 147 (1894)).
7
No. 78266-5-U8
the particular facts and circumstances of each case.” Lopp v. Peninsula Sch.
Dist. No. 401, 90 Wash. 2d 754, 759, 585 P.2d 801 (1978).
“A court of equity moves upon consideration of conscience,
good faith and reasonable diligence. Knowledge and unreasonable
delay are essential elements of the defense of laches. The precise
time that may elapse between the act complained of as wrongful
and the bringing of suit to prevent or correct the wrong does not, in
itself, determine the question of laches. What constitutes
unreasonable delay is a question of fact dependent largely upon
the particular circumstances. No rigid rule has ever been laid
down.”
Stewartv. Johnston, 30 Wash. 2d 925, 935-36, 195 P.2d 119 (1948) (quoting Fed.
United Corp. v. Havender, 24 Del. Ch. 318, 345, 11 A.2d 331 (1940)).
The chief element of laches in dispute before us is whether an
unreasonable delay took place. Genuine issues of material fact exist regarding
the reasonableness of CitiBank’s, and its successor in interest Wilmington’s,
decisions not to pursue foreclosure at an earlier time. Condo Group and
Umpqua contend that CitiBank, and later Wilmington, unreasonably delayed the
commencement of foreclosure proceedings when CitiBank, purportedly aware of
the default judgment in 2012, took no action to vacate that judgment until 2016,
with no foreclosure proceeding being commenced by Wilmington until December
of that year.5
~ To the extent that the third party defendants dispute the validity of the trial court’s
vacation of the 2012 default judgment, they are wrong. They do not have standing to challenge
this decision as they were not parties to the case at the time.
Nor was CitiBank required to give notice to any of the third party defendants of its motion
to vacate. CR 60(e)(3) provides that a motion to vacate “shall be served upon all parties affected
in the same manner as in the case of summons in a civil action.” Only parties to the litigation
must be served—the rule does not require that notice be given to every conceivable entity with an
interest in the outcome of the litigation. Again, at the time the motion to vacate was brought,
none of the third party defendants were parties to the case.
8
No. 78266-5-1/9
Condo Group analogizes CitiBank’s and Wilmington’s courses of action to
that taken by a junior lienholder in Carison v. Gibraltar Savings of Washington,
50 Wash. App. 424, 749 P.2d 697 (1988). The Carisons, junior lienholders, saw
their interest wiped out in a foreclosure sale by the senior lienholder and took no
action to assert their interest when the borrower challenged the foreclosure.
Carlson, 50 Wash. App. at 426, 431. More than three years after receiving notice
of the foreclosure, they sued to invalidate the foreclosure sale and reinstate their
lien. Carlson, 50 Wash. App. at 427. The court held that this suit was barred by
laches, as the Carlsons had notice of the original foreclosure, and the “most
charitable interpretation” of the undisputed facts was that they were waiting for
their rights to be vindicated in the borrower’s litigation rather than acting
themselves. Carlson, 50 Wash. App. at 431.
In both the trial court and on appeal, Wilmington asserts that the delay
was the result of events taking place outside the arena of litigation: First, in
August 2013, after loan servicing responsibility was transferred from JPMorgan
Chase Bank, N.A. to Select Portfolio Services (SPS), the latter determined that
Chase had not sufficiently completed loss mitigation efforts with the borrower,
and SPS placed the loan on a collection hold while this was attempted; then,
when loss mitigation failed, SPS consulted a law firm to develop a litigation
strategy to recover the property. Wilmington does not cite to any document in
the record that details this process other than a declaration in support of its
motion for summary judgment. Clerk’s Papers at 866-67. The declaration is not
supported by any other evidence.
9
No. 78266-5-1/10
Condo Group and Umpqua argue that CitiBank and its servicers’ efforts to
mitigate losses with Kevin Hoover from 2013 to early 2015 had nothing to do with
the status of the property, and that CitiBank, as a deed of trust beneficiary, did
nothing to assert its rights when notified of the sheriff’s sale. They point to the 65
months that transpired between CitiBank becoming clearly aware of the sheriff’s
sale and Wilmington’s December 2016 assertion of the right to foreclose. In
support, they also point to an October 2012 communication between QLS and
CitiBank that conveyed the position of Condo Group that the deed of trust
security interest had been extinguished and a cease and desist letter from Condo
Group to QLS that led to QLS’s cancellation of a planned trustee’s sale.
Further, they argue that communications between CitiBank’s lawyers and
Condo Group offering to buy the property from Condo Group showed that
CitiBank recognized Condo Group as the property’s rightful owner. They also
assert that constructive notice was given by the recording of the statutory
warranty deed in 2013. As for Wilmington’s allegedly unreasonable delay in
moving to foreclose after vacation of the default judgment, the record does not
disclose precisely when or how Wilmington acquired CitiBank’s interest in the
property.6
The parties’ appellate arguments demonstrate that the evidence before
the trial court at the time of the motion for summary judgment supported
6 With regard to the laches, equitable estoppel and bona fide purchaser issues, we list
examples of competing inferences drawn by the parties. These lists are not exhaustive and other
competing inferences may exist.
10
No. 78266-5-I/i I
competing inferences.7 Fact-finding is necessary to determine which inferences
should properly be drawn and whether the facts, as found by a fact finder,
support application of laches. The trial court erred by granting summary
judgment when facts were in dispute.
IV
Condo Group and Umpqua next assert that the doctrine of equitable
estoppel bars Wilmington’s efforts to enforce its deed of trust. They assert that
the trial court erred by dismissing this defense. As with aches, the evidence put
forth by the parties gives rise to competing inferences that rendered summary
judgment improper.
The elements of equitable estoppel are: (1) an act or omission by the first
party; (2) an act by another party in reliance on the first party’s act, and (3) an
injury that would result to the relying party if the first party were not estopped
from repudiating the original act. Kramarevcky v. Dep’t of Soc. & Health Servs.,
122 Wash. 2d 738, 743, 863 P.2d 535 (1993). This doctrine is not favored and must
be proved by clear, cogent, and convincing evidence. Robinson v. City of
Seattle, 119 Wash. 2d 34, 82, 830 P.2d 318 (1992). Moreover, our Supreme Court
has explained that “mere silence or acquiescence will not operate to work an
estoppel where the other party has constructive notice of public records which
~ Wilmington also disputes the third element of laches, namely, that the third party
defendants would be prejudiced by the late assertion of its foreclosure right, because the parties
are covered by a title insurance policy. The applicability of relief does not turn on whether a party
is insured. Alaska Pac. S. S. Co. v. Sperry Flour Co., 94 Wash. 227, 230, 162 P.26 (1917). Nor
does Wilmington show that the availability of title insurance extends to cover the entire loss that
the third party defendants would suffer were it to foreclose. Thus, there are also genuine issues
of material fact regarding the third element of laches.
11
No. 78266-5-1/12
disclose the true facts.” Waldrip, 40 Wash. 2d at 476. “Where the parties have
equal means of knowledge there can be no estoppel in favor of either.” Waidrip,
40 Wash. 2d at 476. “[V}ery clear and cogent evidence” is required ‘to estop an
owner out of a legal title to real property.” Tyree v. Gosa, 11 Wash. 2d 572, 578,
119 P.2d 926 (1941).
The crux of the parties’ dispute over the applicability of equitable estoppel
is the second element: whether Condo Group, and later Lian and Umpqua,
reasonably relied on CitiBank’s actions and inaction in the wake of the default
judgment.8 To support its claim that Wilmington is equitably estopped from
commencing its foreclosure proceeding, Condo Group points to Board of
Regents of University of Washington v. City of Seattle, 108 Wash. 2d 545, 553-54,
741 P.2d 11(1987). That case dealt with a dispute over the City’s easement
over Fourth Avenue, which traversed property owned by the Board of Regents.
In 1906, the City pursued a condemnation action and obtained a default
judgment awarding it the easement over Fourth Avenue. In 1984, the Board
belatedly challenged the condemnation due to a dispute over a pedestrian
skybridge permit. Bd. of Regents, 108 Wash. 2d at 549. Our Supreme Court
rejected this challenge on the ground that the “State failed to challenge the
original 1906 condemnation award while, with knowledge that the City depended
upon the validity of that award, the City improved, graded, and regulated Fourth
Avenue without challenge from the State.” Bd. of Regents, 108 Wash. 2d at 555.
8 As with laches, Wilmington also avers that the existence of title insurance negates the
third party defendants’ assertion of potential monetary loss. For the reasons discussed above,
we disregard this assertion.
12
No. 78266-5-1/13
Notwithstanding the notable difference between a delay of 75 years and a
delay of 4 years, Condo Group asserts that it justifiably relied upon various of
CitiBank’s actions and inactions during the interval between the original
foreclosure by the Association and the initiation of Wilmington’s foreclosure
proceeding. These actions or inactions include CitiBank’s silence prior to the
2012 sheriff’s sale, CitiBank’s scheduling and cancellation of its own trustee’s
sale on its deed of trust, also in 2012, and CitiBank’s attempt to purchase the
property from Condo Group in 2013. Thus, Condo Group contends, CitiBank
acknowledged that its security interest had been extinguished by the 2012
sheriff’s sale.
Wilmington, however, asserts that none of these actions amounted to an
acknowledgment that its security interest had been extinguished. Wilmington
avers that communications between Condo Group and CitiBank were of a
sporadic nature, that it had no part in the trustee’s sale planning as it was a
beneficiary and not a trustee of the trust, and that any other communications
prior to CitiBank’s motion to vacate were aimed at resolving the issue without
waiving its rights.
Ultimately, again, while the parties do not dispute the underlying facts, the
record gives rise to competing inferences as to the import of and rationale for
CitiBank’s actions and communications. Similarly, questions remain and
competing inferences exist as to the degree of reliance that Condo Group placed
upon CitiBank’s behavior. Summary judgment dismissal of the equitable
estoppel defense was improper.
13
No. 78266-5-1/14
V
Next, Umpqua asserts entitlement to bona fide purchaser protection. The
bona fide purchaser doctrine provides that a good faith purchaser for value who
is without actual, constructive, or inquiry notice of another’s interest in real
property has a superior interest in the property. Tomlinson v. Clarke, 118 Wash. 2d
498, 500, 825 P.2d 706 (1992); see also Miebach v. Colasurdo, 102 Wash. 2d 170,
175, 685 P.2d 1074 (1984) (“A bona fide purchaser for value is one who without
notice of another’s claim of right to, or equity in, the property prior to his
acquisition of title, has paid the vender a valuable consideration.” (quoting
Glaserv. Holdorf, 56 Wash. 2d 204, 209, 352 P.2d 212 (1960))). The rule has also
been applied to “bona fide mortgagors or [e]ncumbrancers as well as bona fide
purchasers,” bringing Umpqua within its purview. Miller v. Am. Says. Bank &
Trust Co., 119 Wash. 243, 247-48, 205 P.388 (1922) (citing Geo. M. McDonald
&Co. v. Johns, 62 Wash. 521, 522, 114 P.175(1911)).
“Good faith” “means [a subsequent purchaser] shall not have knowledge
or notice of the other party’s interest in some way outside the recording of the
instrument that creates that interest.” 18 WILLIAM B. STOEBUcK & JOHN W.
WEAVER, WASHINGTON PRACTIcE: REAL ESTATE: TRANSACTIONS § 14.10 (2d ed.
2004). “The burden of establishing that a purchaser had prior notice of another’s
claimed right or equity rests upon the one who asserts such prior notice.” Biles
Coleman Lumber Co. v. Lesamiz, 49 Wash. 2d 436, 439, 302 P.2d 198 (1956).
A bona fide purchaser of an interest in land is entitled to rely on record
title. Lind v. City of Bellinqham, 139 Wash. 143, 147, 245 P. 925 (1926); Levien
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No. 78266-5-1115
v. Fiala, 79 Wash. App. 294, 299, 902 P.2d 170 (1995). The determination of a
buyer’s status as a bona fide purchaser is a mixed question of law and fact
because what a purchaser knew is a factual question, but the legal significance
of that knowledge is a legal question. Peoples Nat’l Bank of Wash. v. Birney’s
Enters., Inc., 54 Wash. App. 668, 674, 775 P.2d 466 (1989); Steward v. Good, 51
Wash. App. 509, 512, 754 P.2d 150 (1988).
A purchaser is on notice if he or she has knowledge of facts sufficient to
put an ordinarily prudent person on inquiry and a reasonably diligent inquiry
would lead to the discovery of title or sale defects. Steward, 51 Wash. App. at 513
(quoting Peterson v. Weist, 48 Wash. 339, 341, 93 P. 519 (1908)). A court must,
therefore, determine whether events surrounding the property’s sale created a
duty on the subsequent purchaser’s part to inquire into possible flaws in the
foreclosure process. Albice v. Premier Mortq. Servs. of Wash., Inc., 157 Wn.
App. 912, 929, 239 P.3d 1148 (2010), affd, 174 Wash. 2d 560, 276 P.3d 1277
(2012).
A major factor in determining whether the purchaser had inquiry notice is
the purchaser’s real estate investment experience. Miebach, 102 Wash. 2d at 176
(purchaser with 23 years of investment experience was not bona fide purchaser).
Another factor is the price paid for a property. It is not unusual for a foreclosure
proceeding to result in a property being sold for less than its fair market value.
Albice, 157 Wash. App. at 931. However, an inadequate purchase price may be a
factor that puts a purchaser on notice of another party’s claim of right to, or equity
in, the property. See Casa del Rev v. Hart, 110 Wash. 2d 65, 72, 750 P.2d 261
15
No. 78266-5-1/16
(1988); Miebach, 102 Wash. 2d at 176-77. While there is no set standard for
determining an inadequate purchase price,
Generally, however, a court is warranted in invalidating a sale
where the price is less than 20 percent of fair market value and,
absent other foreclosure defects, is usually not warranted in
invalidating a sale that yields in excess of that amount. While. . .
the trial court’s judgment in maffers of price adequacy is entitled to
considerable deference, in extreme cases a price may be so low
(typically well under 20% of fair market value) that it would be an
abuse of discretion for the court to refuse to invalidate it.
RESTATEMENT (THIRD) OF PROP.: MORTGAGES § 8.3 cmt. b (AM. LAW INST. 1997).
In this case, Condo Group purchased the property at the sheriff’s sale for
$20,100, at a time when the condominium was valued at $277,000. Thus, the
purchase price was approximately 7.3 percent of the property’s fair market value.
Thus, the recorded history of the property, which showed the extinguishment of
CitiBank’s security interest, weighs in favor of bona fide purchaser status. The
purchase price, however, could give rise to a different inference.
That the foreclosure sale was the result of a judicial foreclosure action is
also of significance. A search of the court file by Lian would have revealed that
CitiBank was a named defendant in a judicial action, that CitiBank had been
served with process, that CitiBank had not challenged the sufficiency of the
service, that the superior court judge had treated the service as sufficient, and
the entry of a judgment and decree against CitiBank extinguishing its interest.9
These facts give rise to inferences of benefit to Lian and Umpqua. That
~ A buyer might reasonably conclude that a judicial foreclosure action is more likely to be
absent injustice or mistake than would be a nonjudicial foreclosure action.
16
No. 78266-5-1/17
Wilmington contends that other facts might negate or overcome these inferences
is of no moment on summary judgment.
Finally, there is a lack of evidence in the record as to what real estate
investment experience, if any, Lian had at the time he purchased the property.
Indeed, there is no indication of what business experience Lian accrued during
his life or what knowledge he had of the condominium in question.1° If Lian was
experienced, inferences beneficial to Wilmington could be drawn. The contrary
would be the case were he inexperienced, On remand, evidence can be
adduced better completing the picture.11 As the evidence now stands, trial court
fact-finding is necessary. Summary judgment was improper.
10 There is also a dispute as to whether the existence of an unreleased deed of trust,
recorded prior to the Association’s foreclosure judgment, would be sufficient to put Lian and
Umpqua on inquiry notice. Judicial foreclosure of a senior mortgage, if valid, extinguishes all
junior interests whose holders were named as defendants. Worden v. Smith, 178 Wash. App. 309,
319-20, 314 P.3d 1125 (2013) (citing U.S. Bank of Wash. v. Hursey, 116 Wash. 2d 522, 526, 806
P.2d 245 (1991)). Our courts have recognized that the bona fide purchaser rule protects a
purchaser who acquires property at a judicial sale, but was not a party to the action giving rise to
the sale, even if the judgment is subsequently overturned on appeal. Grand lnv. Co. v. SavaQe,
49 Wash. App. 364, 368-69, 742 P.2d 1262 (1987) (citing Prince v. Mottman, 84 Wash. 287, 295,
146 P. 841 (1915)). In this case, the judgment was simply vacated after Condo Group, and Lian,
took title to the property. Whether these parties were aware that the default judgment herein was
subject to vacation, and when such knowledge arose, is, again, a question of fact precluding
summary judgment.
~ Umpqua also asserts that CitiBank and Wilmington’s period of silence amounted to a
waiver of its claims against it. Unlike its other equitable defenses, Umpqua cannot show that a
genuine issue of material fact precluded dismissal of this defense on summary judgment.
“Waiver is an equitable principle that can apply to defeat someone’s legal rights where
the facts support an argument that the party relinquished their rights by delaying in asserting or
failing to assert an otherwise available adequate remedy.” Albice, 174 Wash. 2d at 569. Waiver
must be shown by substantial evidence of unequivocal acts or conduct showing intent to waive,
“and the conduct must also be inconsistent with any intention other than to waive.” Mid-Town Ltd.
P’ship v. Preston, 69 Wash. App. 227, 233, 848 P.2d 1268 (1993).
The evidence relied upon by Lian and Umpqua in asserting that Wilmington or CitiBank
waived its security interest does not point to any actions by Wilmington or CitiBank that show an
intent to waive the security interest. Their conduct is not plainly inconsistent with any other
intention besides walking away from the deed of trust. The doctrine of waiver is not applicable.
The defense was properly dismissed.
17
No. 78266-5-1/18
VI
Next, we turn to Wilmington’s unjust enrichment claim. At trial, this claim
was dismissed as moot. Wilmington does not challenge this dismissal, but seeks
to reserve its claim of unjust enrichment as an alternative remedy in the event we
reverse the foreclosure decree and deny it the benefit of the deed of trust.
Because we remand this case for further proceedings, the claim should be
reinstated.
VII
After granting Wilmington’s motion for summary judgment, the trial court
issued a supplemental judgment awarding to Wilmington $33,238.99 in attorney
fees and costs. Given our resolution of the issues herein, that award must be
vacated. Any award of trial or appellate attorney fees must await the
identification of a substantially prevailing party.
Affirmed in part, reversed in part, and remanded for proceedings
consistent with this opinion.
WE CONCUR:
e~9.
‘V
18